Topic: Technical Analysis and Fundamental Analysis👀 (Read 439 times)
I heard there is a new approach called "Quantamental" which stands for Quantitative and Fundamental. This new approach has been develop in Wall St but I'm not sure how to use this on crypto.
If you backtest a sufficient amount of strategies you're statistically bound to find a "successful" strategy eventually though. Put differently, you can find "patterns" in any snippet of random data if you look long enough, that doesn't make the pattern applicable to larger amounts of random data from the same source though.
How to ensure that the backtesting results are actually sound and not just some random fluke? Serious question, not a rhetorical one.
How to ensure that the backtesting results are actually sound and not just some random fluke? Serious question, not a rhetorical one.
That's a big problem in social sciences and medicine. It is called "p-hacking". Researchers tweak their models until they come up a result with 95% confidence, and they think they have found something. The reality is that 95% confidence means that 1 in 20 is just fluke, and they have found the fluke. The same issues applies to tweaking a trading strategy until the back-testing results look good.
how can you make such a drastic assumption? what evidence do you have that p-hacking is occurring when a trader backtests strategies? p-hacking involves the deliberate misuse of data to knowingly present false findings. it's used to fool other people.
why would a trader do that? so they can purposefully lose their own money? a self-employed trader has strong incentive not to do that because improper backtesting (such as deliberately omitting data, as with p-hacking) will only lose his shirt. what you're saying only applies to snake oil salesmen trying to sell indicators to noobs because they have incentive to overstate effectiveness. traders, on the other hand, have no incentive to deliberately misuse backtesting data.
overfitting is a legitimate (and separate) concern though. in the case of either p-hacking or overfitting, one simply needs to test the model against data outside the sample used to develop it, to ensure statistical significance. rigorous testing is not easy, but your assertion that any statistically significant backtesting data must be a fluke is really not grounded in reality.
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
Greatest short description of TA. On top of that it doesnt work in Bitcoin market. It works in common market only because most people follows it 
, self pushing wheel. In Bitcoin we don't care about TA, we just HODL and sell high, buy low.
If you backtest a sufficient amount of strategies you're statistically bound to find a "successful" strategy eventually though. Put differently, you can find "patterns" in any snippet of random data if you look long enough, that doesn't make the pattern applicable to larger amounts of random data from the same source though.
How to ensure that the backtesting results are actually sound and not just some random fluke? Serious question, not a rhetorical one.
How to ensure that the backtesting results are actually sound and not just some random fluke? Serious question, not a rhetorical one.
That's a big problem in social sciences and medicine. It is called "p-hacking". Researchers tweak their models until they come up a result with 95% confidence, and they think they have found something. The reality is that 95% confidence means that 1 in 20 is just fluke, and they have found the fluke. The same issues applies to tweaking a trading strategy until the back-testing results look good.
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
that's not really a claim about TA so much as a claim about most of its practitioners. serious traders always backtest their trading systems. one of the reasons i transitioned from poker to day trading was because i saw opportunities to repeatedly grind out statistical edges.
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If you backtest a sufficient amount of strategies you're statistically bound to find a "successful" strategy eventually though. Put differently, you can find "patterns" in any snippet of random data if you look long enough, that doesn't make the pattern applicable to larger amounts of random data from the same source though.
How to ensure that the backtesting results are actually sound and not just some random fluke? Serious question, not a rethorical one.
there's no way to guarantee that. all you can do is monitor performance and cut badly performing strategies, knowing that robust backtesting (hundreds or thousands of cases) should render this an infrequent occurrence.
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
that's not really a claim about TA so much as a claim about most of its practitioners. serious traders always backtest their trading systems. one of the reasons i transitioned from poker to day trading was because i saw opportunities to repeatedly grind out statistical edges.
[...]
If you backtest a sufficient amount of strategies you're statistically bound to find a "successful" strategy eventually though. Put differently, you can find "patterns" in any snippet of random data if you look long enough, that doesn't make the pattern applicable to larger amounts of random data from the same source though.
How to ensure that the backtesting results are actually sound and not just some random fluke? Serious question, not a rethorical one.
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
that's not really a claim about TA so much as a claim about most of its practitioners. serious traders always backtest their trading systems. one of the reasons i transitioned from poker to day trading was because i saw opportunities to repeatedly grind out statistical edges.
granted, as with any sort of speculation, there is an intuition some analysts have that's impossible to account for or reproduce.
Since TA is based on nonsense, it will randomly get it right sometimes.
what exactly do you define as TA? there's a lot of nonsense out there, but you're painting with a very broad brush. is using a moving average to determine the underlying trend nonsense? is it pointless to look at volume?
TA surely can't be scientific because conditions aren't completely reproducible. but i don't see why we can't approach it from statistical and common sense perspectives.
Technical analysis is astrology for traders. It is a pseudo-science that dresses itself up to look like a science, but in fact is not based on anything more than fantasy, superstition, and wishful thinking.
Technical analysis is a textbook demonstration of two logical errors: confirmation bias and survivorship bias.
Confirmation bias: https://en.wikipedia.org/wiki/Confirmation_bias
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
Survivorship bias: https://en.wikipedia.org/wiki/Survivorship_bias
Since TA is based on nonsense, it will randomly get it right sometimes. The odds are 50:50. Some people get lucky using TA and some do not. Basically, the people that get lucky go on believing in TA and promoting it, while everyone else just goes away. That is why you see lots of articles promoting TA, but you never see articles showing some how TA gets it wrong.
If you really believe that TA works, then I strongly suggest that you look at it objectively. Be professional. Take it seriously.
Technical analysis is a textbook demonstration of two logical errors: confirmation bias and survivorship bias.
Confirmation bias: https://en.wikipedia.org/wiki/Confirmation_bias
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
Survivorship bias: https://en.wikipedia.org/wiki/Survivorship_bias
Since TA is based on nonsense, it will randomly get it right sometimes. The odds are 50:50. Some people get lucky using TA and some do not. Basically, the people that get lucky go on believing in TA and promoting it, while everyone else just goes away. That is why you see lots of articles promoting TA, but you never see articles showing some how TA gets it wrong.
If you really believe that TA works, then I strongly suggest that you look at it objectively. Be professional. Take it seriously.
- Research its failures just as much as you research its successes.
- It can't all be true. Don't just accept any random bullshit that you read as if it were a fact. Demand evidence.
- It can't be right or appropriate all the time. At least, learn its shortcomings.
- Don't be fooled by its popularity. Lot's of people believe that astrology really works, too.
I apologize to the believers in astrology for equating it to something as absurd as Technical Analysis.
100%
You see all these TA folks on twitter or forums. 9/10 times they get it wrong, then come up with some excuse for why they were wrong. Either that or simply delete the tweet and try again. It's ridiculously easy to make up stuff and sound like you know what you are doing.
Oh XYZ coin is sitting at support with a descending triangle. If it breaks resistance here, I'm looking to short.
Boom...just made that up off the top of my head, lol.
The problem with Fundamental Analysis being used in cryptocurrencies is you have very little to work with, unlike companies where you can see their financial performance and other disclosures or in foreign currency where you can monitor the country's economy in cryptocurrencies you won't have that grasp and the only thing I can think of is ico developers keeping you up to date with their plans. FA is the best thing you can do in order to see if something is really undervalued or not but unfortunately it is hard to do a proper fundamental analysis on cryptocurrencies. TA is a more reliable tool being used in cryptocurrencies as nothing is change when it comes to analyzing them may it be stocks or cryptos.
I think @odolvlobo is just too hardcore on science, actually, TA has some science behind it. It's related to the psychology of the market participants. I personally only use support and resistance level, since it emphasizes on the psychological level of the current price movement. For example, if the price reaches the support level, there will be a tendency to buy, and vice versa. For the pattern, Fibonacci, and candlestick, yeah that's a superstition. Again, related to human psychology who will always look for patterns.
After studying for years about the market in general, I think individual price movement is more random and irrational than you think. The majority of people cannot time the market, but there will be a lucky dude who seemingly able to time the market (who actually just get lucky).
Well, if you feel that today is your lucky day then do the TA and good luck!
After studying for years about the market in general, I think individual price movement is more random and irrational than you think. The majority of people cannot time the market, but there will be a lucky dude who seemingly able to time the market (who actually just get lucky).
Well, if you feel that today is your lucky day then do the TA and good luck!
A friend of mine once wrote a script to generate random chart patterns, for testing. Candlestick charts, based on randomly generated buy and sell orders. They looked really good, pretty natural.
So good actually, that we started to apply some basic TA to the charts as they were generated in real time, just for the lulz.
And it worked.
Subjectively speaking, of course. They were just random patterns generated in real time but we could still make out "resistance" and "support" levels, ascending and descending triangles, etc. and their predictions seemed to hold true. But in the end it was still just random data without logic or reason.
So yeah, so much for TA.
I really want to believe in TA and maybe it does work on some weird level that can't be taught but must be experienced. However in general I think odolvlobo's post summed it up pretty well: TA appears to be mostly a reflection of Confirmation and Survivorship Bias.
That being said, I still think TA is fun. I just wouldn't rely on it.
So good actually, that we started to apply some basic TA to the charts as they were generated in real time, just for the lulz.
And it worked.
Subjectively speaking, of course. They were just random patterns generated in real time but we could still make out "resistance" and "support" levels, ascending and descending triangles, etc. and their predictions seemed to hold true. But in the end it was still just random data without logic or reason.
So yeah, so much for TA.
I really want to believe in TA and maybe it does work on some weird level that can't be taught but must be experienced. However in general I think odolvlobo's post summed it up pretty well: TA appears to be mostly a reflection of Confirmation and Survivorship Bias.
That being said, I still think TA is fun. I just wouldn't rely on it.
first I learnt technical analysis and was trading for some time and I was not knowing any info about to what is was investing I learnt fundamentals also if you are investing you should have both knowledge
I believe that one has to be a guru in TA and have a fair idea of it and it is only in that sense that one can appreciate it's importance. It is a knowledge that one has to learn over a period so as to bring more ideas when it comes to crypto.
Some would argue that math is a skill that needs to be learnt and perfected.
And I didn't promote it, just have an opinion on the information available to me.
You are the one disputing what you seem to understand very little of.
I do not know all about technical analysis. But I believe most human actions are the same to similar situations and this could leave a pattern that can be followed and analysed.
And I didn't promote it, just have an opinion on the information available to me.
You are the one disputing what you seem to understand very little of.
I do not know all about technical analysis. But I believe most human actions are the same to similar situations and this could leave a pattern that can be followed and analysed.
I respect your opinion but I'm just trying bring some rationality to the subject.
It is funny that when I debunk TA, a common response is a claim that I don't understand it. It is funny because that is so wrong and generally the claim is made by people who don't understand it themselves.
So you say you "don't know all about technical analysis", but do you even know the most basic techniques well enough to explain how and why they work? My guess is that you don't. But don't fret because you aren't alone. Most people don't even know where to start.
Let's take the humble moving average. Did you know that there is a lag in the moving average? Did you know that moving averages with different windows have different lags, and when you compare them without aligning them (which is what is normally done), you get mostly noise?
What about Fibonacci retracement? I would like someone to explain the why the numbers are significant without saying it is because you see Fibonacci numbers everywhere in nature.
Oh, and chart patterns and candlesticks ... complete superstition.
The short term price of Bitcoin is influenced by whale manipulation, and sheep activity. Technical analysis can be a useful guide to this behaviour. If you can use the analysis to judge the objectives of the whales, and the reactions of the sheep, then you can surf their waves and make money. Don't leave positons open for long though, as you can be wiped out when the whales start to take their profits. This is why you should use stop losses.
Fundamental analysis is more important for people looking for wealth preservation, and who are prepared to leave an investment untouched for a couple of years. In this case, the only use of technical analysis is to provide guide lines for buying opportunities. Couple this with price averaging in a bear market, and you should do well as a long term holder. This assumes that your evaluation of the fundamentals was correct of course.
Fundamental analysis is more important for people looking for wealth preservation, and who are prepared to leave an investment untouched for a couple of years. In this case, the only use of technical analysis is to provide guide lines for buying opportunities. Couple this with price averaging in a bear market, and you should do well as a long term holder. This assumes that your evaluation of the fundamentals was correct of course.
Some would argue that math is a skill that needs to be learnt and perfected.
And I didn't promote it, just have an opinion on the information available to me.
You are the one disputing what you seem to understand very little of.
I do not know all about technical analysis. But I believe most human actions are the same to similar situations and this could leave a pattern that can be followed and analysed.
And I didn't promote it, just have an opinion on the information available to me.
You are the one disputing what you seem to understand very little of.
I do not know all about technical analysis. But I believe most human actions are the same to similar situations and this could leave a pattern that can be followed and analysed.
I know traders which have achieved great successes using technical analysis based on their ability to correctly read charts and draw patterns.
Do you also know traders that have lost money using TA? If not, then something must be wrong with your information. If so, then why don't you talk about them?It is a skill and like all others needs to be learned and perfected.
It is math (supposedly). There should be no need for skill.If you believe that it really works, then you should be able to explain how it works. If you can't explain how it works, then it must be just magic to you. Do you always go around promoting things that you don't understand?
...
I strongly disagree that technical analysis is nonsense and works based on probability with no actual basis.
I know traders which have achieved great successes using technical analysis based on their ability to correctly read charts and draw patterns.
It is a skill and like all others needs to be learned and perfected.
Thanks for this information. Both technical and fundamental analysis is important for every trader/investor in the cryptocurrency space as we don't have to invest blindly. Crypto is a highly volatile, and high risk investment so it's imperative to always do a lot of research before spending your money on any project.
Technical analysis is astrology for traders. It is a pseudo-science that dresses itself up to look like a science, but in fact is not based on anything more than fantasy, superstition, and wishful thinking.
Technical analysis is a textbook demonstration of two logical errors: confirmation bias and survivorship bias.
Confirmation bias: https://en.wikipedia.org/wiki/Confirmation_bias
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
Survivorship bias: https://en.wikipedia.org/wiki/Survivorship_bias
Since TA is based on nonsense, it will randomly get it right sometimes. The odds are 50:50. Some people get lucky using TA and some do not. Basically, the people that get lucky go on believing in TA and promoting it, while everyone else just goes away. That is why you see lots of articles promoting TA, but you never see articles showing some how TA gets it wrong.
If you really believe that TA works, then I strongly suggest that you look at it objectively. Be professional. Take it seriously.
Technical analysis is a textbook demonstration of two logical errors: confirmation bias and survivorship bias.
Confirmation bias: https://en.wikipedia.org/wiki/Confirmation_bias
One problem with TA is that nobody actually keeps track of its results. The result is that people remember the times that it worked for them, and they discount or forget the times when it didn't. People want to believe that there is a magic formula so much that they ignore the evidence against it.
Survivorship bias: https://en.wikipedia.org/wiki/Survivorship_bias
Since TA is based on nonsense, it will randomly get it right sometimes. The odds are 50:50. Some people get lucky using TA and some do not. Basically, the people that get lucky go on believing in TA and promoting it, while everyone else just goes away. That is why you see lots of articles promoting TA, but you never see articles showing some how TA gets it wrong.
If you really believe that TA works, then I strongly suggest that you look at it objectively. Be professional. Take it seriously.
- Research its failures just as much as you research its successes.
- It can't all be true. Don't just accept any random bullshit that you read as if it were a fact. Demand evidence.
- It can't be right or appropriate all the time. At least, learn its shortcomings.
- Don't be fooled by its popularity. Lot's of people believe that astrology really works, too.
I apologize to the believers in astrology for equating it to something as absurd as Technical Analysis.
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